Contributes Rs 3 billion to Treasury:

Loss–making ventures now make profits – Minister Dayasritha Tissera

By Ranil Wijayapala

“Empowering the Sri Lankan economy by managing government resources through efficient enterprise management strategies” is the vision of the Ministry of the State Resources and Enterprise Development Ministry which was stabilising in 2010 under the broad vision of the ‘Mahinda Chinthana’ to make Sri Lanka the ‘Wonder of Asia’. Dayasritha Tissera as the Minister entrusted with this task of turning loss-making and non-functioning entities into thriving businesses along with his team is making a tireless effort to make these once-reputed state institutions into vibrant state business ventures.

He has come a long way by contributing Rs.2.9 billion dividends to the Treasury during its operations, relieving the Treasury of a big burden. Yet, it has a long way to move forward on its path towards success facing many challenges and obstacles to achieve its target of making all institutions under its purview profit-making ventures. Here is how State Resources and Enterprise Development Minister, Dayasritha Tissera told the Sunday Observer of his march towards success along with his team.

Q: The Ministry of State Resources and Enterprise Development was formed to restructure and re-energise some of the state institutions that were defunct and running at a loss. It had 24 institutions under it purview. What are the changes that have taken place in the past few years?

A: We initially had 24 institutions under our Ministry. But with the expansion of the Cabinet some of the institutions which were under our Ministry were given to other Ministries. Laksala which could earn a profit of Rs.40 to 50 million has been given to the Botanical Gardens and Public Recreations Ministry. Hingurana and Kantale sugar factories which were also under our Ministry have been given to the newly-constituted Sugar Industries Ministry. Apart from this, 15 other state institutions are functioning under our Ministry at present.

Q: What is the present state of these institutions under the purview of your Ministry?

A: Out of these 15 institutions, the Lanka Mineral Sands Company Ltd has been able to remit Rs.2 billion as dividends to the Treasury last year. Lanka Phosphate Company Ltd has also remitted Rs.60 million. BCC Lanka Ltd which was running at a loss earlier has also earned Rs.7.5 million profit last year. BCC has a few loans to be settled with the Bank of Ceylon and we are in the process of repaying the loans and running the institution in an efficient manner.

At present we have taken an initiative to shift the institution to the Wathupitivala area from the present location as we have come to an agreement to release the land for expansion of the court complex in Colombo.

The Government has pledged that the estimated value of the land will be remitted to the BCC Lanka Company Ltd. Paranthan Chemicals Company Ltd is now functioning in the Kalutara area to import and distribute chlorine. We are expecting to reestablish Paranthan Chemicals Company in Paranthan itself in due course. Paranthan Chemicals also is now running as a profit-making institution.

Q: Meanwhile, there are several other institutions which are running at a loss at present. What are your plans to restructure them?

A: We expect to turn Lanka Salusala, Sri Lanka Cement Corporation and the Lanka Cement Company Ltd. which were facing some difficulties during the past few years to profit-making bodies after making necessary changes within the institutions.

Therefore, we have changed the Director Board of the Sri Lanka Cement Corporation and Lanka Cement Company Ltd to make necessary changes in these institutions.

We hope that these institutions will pass the break even point by April this year. We are expecting to restructure Lanka Salusala Limited also within this year to turn it into a profit-making venture.

At the same time, we are also expecting to implement a target-oriented program to settle the problems in plantation sector institutions - Elkaduwa Plantation Company, State Plantation Corporation and Janatha Estates Development Board and to make them profit-making ventures. We are trying to settle the disputes relating to the non payment of EPF, ETF and gratuity to employees during the past 10 to 15 years by selling trees with economic value within these plantations. We are then trying at least to find a solution for the Rs.3000 million problem relating to the EPF, ETF and gratuity to a certain level.

Q: Do you have any other plans to make them profit-making bodies making use of the assets in these institutions?

A: We have some plans to make necessary changes in the plantation sector by appointing efficient management to maintain these plantations which are scattered all over the country. Apart from that we are planning to have different programs to make use of these plantations in a more efficient manner. We are now having discussions with the Tourism Ministry to make use of ancient bungalows in important locations to promote tourism.

We have identified 12 locations for improvement. Apart from that we have embarked on a business diversification program in the plantation sector institutions by starting a mineral water project. We are expecting to expand it further and we are trying our best to run them as profit-making institutions by having a three-year plan.

Q: Your Ministry carried out restructuring programs for some institutions like the Embilipitiya Paper factory by giving them to investors. But it has faced some problems at present. How are you going to settle this issue?

A: We followed the correct procedure when we selected the investor for the Embilipitiya Paper factory. We called Expressions of Interest and selected the Perth International Australian Company.

They paid us Rs. 400 million as an initial payment and it helped us to settle the EPF, ETF and gratuity due to employees and to pay the electricity bill from that payment. Another Rs.200 million was due to the Government. But because of a dispute between the local partner and foreign investor they did not pay us the balance Rs.200 million.

Now they are not in a position to run the institution. They have obtained a loan from a local bank to begin operations. We are now having discussions with the investor, the bank and other investors to settle the issue which has inconvenienced the Government to a certain extent. Now we believe that there is room for us to settle the issue without creating a problem.

Q: The paper mill in Valachchenai also underwent a restructuring process. What is the present situation of the Valachchenai paper mill?

A: When we took over the Valachchenai paper mill it was producing only 35 tonnes. It has now increased to 300 metric tonnes. By mid this year we expect to exceed production capacity by 500 metric tonnes per month. With that production capacity the paper mill will be able to earn the income required to the pay salaries EPF, ETF and gratuity to employees, with its income when it produces 400 metric tonnes per month.

By the end of this year we are expecting to increase capacity to 1,500 metric tonnes. After we reach 500 metric tonnes we will be able to export. To increase capacity of the paper mill we need to have more scrap paper as raw material. Sri Lanka is exporting 900 metric tonnes of scrap paper per month and I had discussions with these exporters to get a part of that scrap paper

to our factory. If we cannot settle the issue with mutual understanding we will have to seek a legal mechanism to get a quota of the scrap paper that is exported. I have already submitted a Cabinet paper to get the scrap paper collected at state institutions free to the Valachchenai paper mill. Another Cabinet paper has been submitted to make it compulsory for government institutions to purchase file covers and paper from our factory. We are expecting to modernize technology and increase the production capacity further.

Q: Many of the government factories such as the Kankesanthurai cement factory were institutions that helped the people. But they had to be closed due to terrorism. Does the Ministry have the capacity to re-establish these factories to their former glory or do you have any other program under your Ministry?

A: There are some logistical problems with regard to starting the Kankesanthurai cement factory as it was not functioning for a long period. The area has yet to be cleared of landmines. We have decided to start a cement packaging factory first. To import cement in bulk form and bag cement at the factory. Only at the second and third stage that we are expecting to re-establish the cement factory. More than 90 percent of the machinery cannot be used at present. We have to commence as a new factory. Limestone covered land is also there. We have a plan to start a cement bagging factory in the Hambantota area as well.

Q: Do you have any program to provide cement at concessionary rates through the Sri Lanka Cement Corporation and Lanka Cement Company Ltd.?

A: We are supplying cement to the local market at the lowest rate. When there are attempts to increase the cement price by private sector importers by providing cement at the lowest possible price keeping a small margin of profit for us, we are controlling the price of cement in the market. At present we supply cement for less than Rs.800. But we will have to increase the price but this price will be the lowest price in the market.

Q: When restructuring government institutions investors are exploiting assets of these institutions and abandoning them. What kind of program do you have to avoid such situations in the restructuring process of government institutions?

A: When we restructured the Embilipitiya paper factory we gave them only the machinery but not the land. So we had a problem there. In the future we are going to rectify this situation.

The problematic situation that arose there was not due to our fault but due to a conflict between the local agent and the foreign investor. Therefore, we have taken the land back to the Government after having discussions with the bank.

Q: Have you identified institutions under your Ministry that cannot be brought back to operational level and what are your plans for these institutions?

A: We have identified some institutions which were only name boards. In some institutions, we had only the land. So we have listed them as non functional entities under our Ministry. Institutions like the Kahagolla Engineering Service Company Ltd, Werahera Engineering Services Company Ltd, Lanka Sack Makers Ltd. and the Department of Small Industries are such non functional entitites. Some of the land and buildings under these institutions have been vested with other Ministries according to their requirements. Now we have only 15 institutions under our Ministry with the guidance given by President Mahinda Rajapaksa we will be able to make visible changes in these institutions in the next two to three years. For some institutions we are canvassing partnerships with investors to have necessary technology and operate them as joint ventures.

Q: Under the intense competition in the open economy there is a perception that Government institutions cannot compete with private sector institutions. As a Ministry handling many of these government enterprises do you agree with this notion?

A: As a country we have accepted the open economic policy a few decades back. When we talk about government institutions we have given them an unnecessary burden. As for Laksala, it had a good reputation as a government institution, now it can earn profits after making necessary changes in these institutions. Many of the institutions under our Ministry depended on funds from the Treasury. We changed that policy after introducing drastic changes in these institutions. Now we don’t take money from the Treasury for the industrial sector.

The only problem we have is with regard to the plantation sector companies.

If we get the support of environmental organisations and political authorities we can make them also profitable ventures within the next few years. We have plans to do that and if we get the required support and honest officials in these institutions we will be able to achieve targets.

Q: You said that Lanka Mineral Sands Company Ltd is generating huge profits. What are the programs you have to expand it further?

A: We have imported required machinery to make use of another mineral sand deposit located across the Kokilai lagoon. We have acquired a 50 acre-land to fix those machines and make use of that mineral sand deposits.

Accordingly we have set a target of achieving Rs.4 billion profit this year. We think we can achieve that target when we compare with competitive prices in the world market.

We are working with a business mind when issuing our mineral sand stock to the market. We are keeping our stocks in our stores. When silicon, ilmonite and high titanium stocks are freely available in the world market and we will release the stock when there is a shortage in the market during the winter season in other countries. We have a good team and it is a great strength to us.

Q: At the initial stages your Ministry had to take funds from the Treasury. What is the situation now?

A: Yes we had to take Treasury funds to run many of our institutions at the initial stages. But with the changes we made in these institutions we are in a position to contribute funds to the Treasury.

Last year we contributed nearly Rs.3 billion to the Treasury from the earnings of our profit making institutions. We are happy about this situation and we are expecting to increase that limit upto Rs. 5 billion this year.